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Transition-Support Clause in Auto Supply Contract Enforced

Warner attorneys succeeded in enforcing a contract provision that had never been tested in court before, creating valuable precedent for use against any supplier who threatens to breach its contract with our client in the future. Our client, a Tier 1 automotive supplier, relied on a steady, just-in-time delivery of components from its Tier 2 suppliers. One such supplier abruptly threatened to stop shipment of crucial parts unless it received a price increase, and also declared an untimely end to their contract. The parties’ contract anticipated these events. Not only did it contain a firm price, but it also required the Tier 2 supplier to continue providing parts during the entire time it took our client to get another supplier up and running. As is common in the industry, qualifying a new supplier requires a Production Part Approval Process, or PPAP, that often takes several months to complete. Despite firm resistance from the offending supplier, Warner attorneys achieved a summary judgment ruling from the federal district court enforcing the client’s contract and requiring the supplier to continue shipping parts at the contract price throughout the PPAP. On appeal, Warner again achieved a unanimous ruling from a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit affirming the ruling. Because no court had previously ruled on this transition-support provision, this victory has proven to be a valuable precedent when other Tier 2 suppliers have attempted to end production before a replacement supplier has been secured.